Which financial measure compares monthly debt payments to gross income?

The measurement that compares monthly debt payments to gross income is the debt-to-income ratio. This ratio is crucial for assessing a borrower's ability to manage monthly payments and is frequently used by lenders to evaluate a borrower's creditworthiness. By calculating the debt-to-income ratio, you can determine what portion of an individual’s gross income is used to cover debt obligations, which can include credit card payments, loans, and mortgages.

An optimal debt-to-income ratio indicates that an individual has a manageable level of debt relative to their income, making it easier for them to secure loans or credit. Conversely, a high ratio suggests that a higher percentage of income is being consumed by debt payments, which may lead to financial strain.

Other options, such as a credit score, measure a borrower's creditworthiness based on credit history and outstanding debts rather than their income relative to debt payments. Net worth reflects the difference between total assets and total liabilities, providing a snapshot of financial health but not focusing specifically on debt payments. The liquidity ratio assesses an individual's ability to meet short-term financial obligations with available assets, which is different from assessing ongoing debt payment capacity in relation to income.